It’s an odd psychology.
People think market all-time highs means expensive.
And all-time lows means cheap.
Nothing could be further from the truth.
U.S markets have consistently been pushing into new highs for some time.
Yet while this has been happening, we still see traders looking for reasons to short the markets.
Too expensive they say.
It seems we are never happy. Even when longer term trends are clearly in play.
So why the long face?
The thing with markets is that people treat them like a real-world retail environment. If something looks expensive, we’re hesitant to buy it. Conversely, if something is on sale, we blindly dive in looking for a bargain.
This subjective way of thinking is what causes losses for many investors.
Many miss out on multi-year uptrends because they think markets are too expensive. Or they ‘catch falling knives’ trying to buy a bargain, when the markets still have lower to travel.
This is trading via emotional subjectivity. Acting on what you feel and think is going to happen next, rather than following price action.
If you ever start thinking that markets are being irrational, then always remember that classic quote from economist John Maynard Keynes:
‘The markets can stay irrational longer than you can stay solvent.’
And understand this:
No one knows what the markets are going to do from one day to the next. NO ONE. So never fall into the trap of trying to be that someone who thinks they do!